Market 'Really Worried' About Higher Rates: Hedge Fund Exec

After appearing on "The Strategy Session" on Thursday, Jeff Kronthal, co-managing partner and co-CIO of KLS Diversified Asset Management, a hedge fund that specializes in fixed income, continued the discussion off-air with David Faber, about understanding the interest rate picture.

"The market is overpaying for protection against higher rates. The market is really worried, I think, about much higher rates going forward," Kronthal said.

"Over the next couple of years, the market's implying that 3-year Treasury rates are going up a couple of hundred basis points (bps)," he said.

"Same thing in the swap markets. When you look forward, you're implying, for example, one year from now, five-year swap rates to be somewhere around 320, when they are around 235 right now—an increase of 85 bps points over the next year," Kronthal added.

Check out our entire conversation with Kronthal in this web exclusive video to see Kronthal's "costless collar" strategy.